In a world labelled “smart-world”, businesses and governments alike have come up with creative ways to make decision-making a lot easier and effective than ever before. Although, this is not a new topic in the ICT and Business world; and should not be for any business owner! I’ve decided to do a write-up on it for the benefit of those of us who have no clue what it is; It’s either we’ve never heard of the term before but have a good guess of what it might be all about; or we simply do not have a clue what it might mean, either ways, I got you!
So, customer profiling; what is it and what’s my business with it?
What is it?
I’ll tell you what it’s not! It’s not opening a Facebook profile for your customers and it’s certainly not limited to having a list of your customers stored up somewhere. Before we come to understand what Customer Profiling is, I believe it will be wise for us to, first of all, understand what Profiling is.
Profiling, as defined by dictionary.com, is “the use of personal characteristics or behavior patterns to make generalizations about a person”. In the Nigerian Parents’ term “show me your friends and I’ll tell you who you are” or in this case, “Show me what you like and how you act and I’ll tell you who you are”. Basically, profiling is generalizing or coming to a conclusion about a person or persons based on similar characteristics or life choices.
What, then, is Customer Profiling? Based on our understanding of what Profiling is, we can say that Customer Profiling is generalizing or coming to a conclusion about a customer or group of customers based on similar product or service preferences and characteristics. Two things mentioned here: product or service preference and characteristics. Profiling your customers based on one of these two may or may not be as effective as profiling your customers based on both of them.
Having said that, let me give you a practical example of what customer profiling is. David walks into your electronic store. David by appearance is a dashing, young, vibrant middle-aged man *wink* (characteristics). Your front desk staff or customer service staff (let’s call them sales staff) comes along to help David with making a choice of what he wants; and the first thing that comes out from the mouth of your sales staff is “I know what you want, let me take you to the video game isle (product preference)”. That, right there, dames en heren (which is ladies and gentlemen in Dutch), is what we call a classic customer profiling move; regardless of if it was effective or not, this is a perfect example of customer profiling. What your sales person has done is this: he/she came to a conclusion about David based on prior generalization of young males that usually purchase video games in your electronic store. This is the simplest explanation of what customer profiling is.
Customer profiling, however, is obviously much more than a sales person dealing with one customer; on a large scale, customer profiling can begin to get a little bit more complex in achieving it. There is the technical side to achieving Customer Profiling. Techniques like data mining and data analysis are used to obtain maximum effectiveness of customer profiling. As a matter of fact, Customer Profiling cannot be achieved apart from data mining and data analysis; regardless of if these are done in your brain or on a computer system, data has to be mined and analyzed. Data mining and analysis, in a nutshell, is the process of, literally, digging through past data, making some sense out of it and using it to guide your decision making process.
If you’ve never heard of the “legendary” beer-diaper decision (legendary in its own rights, for us ICT in Business lovers), well, here it goes, Govexec puts it this way “A number of convenient store clerks, the story goes, noticed that men often bought beer at the same time they bought diapers. The store mined its receipts and proved the clerks’ observations correct. So, the store began stocking diapers next to the beer coolers, and sales skyrocketed”. The story, they say, is a myth but is a perfect example of customer profiling.
The store generalized or came to the conclusion that every other person that would buy a diaper would most likely buy a beer; based on past similar purchases of both these items in their store – Customer Profiling! They made an observation, dug through past data, made sense out of beer – diaper sales data and used that to guide them in their decision making process of product arrangement.
In my next post, Customer Profiling, What’s my business with it?, we’ll talk about a few benefits of customer profiling for start-ups, SMEs and large enterprises.
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